Chinese capital dominates Thai e-commerce, threatening local businesses

Monopoly by three foreign platforms is depriving Thai merchants of access to vital customer data and exposing them to price wars with Chinese rivals

 

The Thai e-commerce landscape is undergoing a transformation, marked by intense competition from international platforms and the increasing presence of Chinese businesses. 

 

Industry experts warn of a potential crisis for local small and medium-sized enterprises (SMEs).

 

Pawoot Pongvitayapanu, CEO of Pay Solutions and a prominent figure in the Thai e-commerce sector, revealed that foreign platforms now control two-thirds of the market. 

 

Thai SMEs are increasingly reliant on these platforms, particularly Shopee and Lazada, which together command a staggering 79% market share. Meanwhile, TikTok is rapidly expanding its influence, putting pressure on established competitors.

 


"We are witnessing encroachment," Pawoot stated. "The majority of platforms operating in Thailand are foreign-owned. With limited competition, they wield considerable control."
 


 

This monopolistic environment is depriving Thai merchants of access to crucial customer data and hindering their ability to build direct customer relationships. Consequently, major platforms are able to raise fees at will, with limited government oversight.

 

The influx of Chinese goods is exacerbating the situation, forcing Thai online retailers into fierce price wars due to the dominance of these platforms.

 

 
Rising fees and diminishing bargaining power

According to the "Ecommerce in Southeast Asia 2024" report by Singapore-based consultancy Momentum Works, the Thai e-commerce market is valued at about 680 billion baht. Market share is dominated by Shopee (49%), Lazada (30%), and TikTok Shop (21%).

 

Pawoot highlighted the predatory tactics employed by foreign platforms, which involve substantial market investments. 
  


"Initially, they offered discount vouchers and free delivery, while allowing merchants to sell without any service fees. This resulted in annual losses of billions. Such sustained losses are untenable for Thai businesses, forcing many to exit the market," he said. 


 

The heavy reliance on these foreign platforms has left Thai entrepreneurs with little to no bargaining power, forcing them to accept unfavourable terms.

 


"Service fees, once non-existent, have steadily risen. Some sellers now face fees of 7-10%, with no alternative. With only three major players, there appears to be a coordinated effort to raise prices," he stated. 
 


 

Furthermore, merchants are burdened with high platform fees that erode profits, a situation largely unchecked by regulatory bodies. Intense price competition compels sellers to engage in "price wars" and promotional activities, which ultimately diminish profits and threaten long-term sustainability.

 

Access to customer data remains a significant challenge. Foreign platforms often restrict data access, hindering merchants' ability to understand customer behaviour and develop effective marketing strategies.

 

Meanwhile, Thai platforms are lagging behind their foreign counterparts in terms of investment in innovative technologies, such as artificial intelligence (AI), automation, and customer data platforms (CDP). 

 

This technological gap, coupled with a shortage of skilled digital marketing professionals, hampers long-term competitiveness.
  



 

 
Chinese businesses’ aggressive market entry

The aggressive entry of Chinese businesses into the Thai market, both online and offline, presents another major challenge. The influx of substandard foreign goods, particularly through online marketplaces, continues to be a concern.

 

While government agencies, such as the Office of the Consumer Protection Board (OCPB), have held discussions with platform providers, concrete solutions have yet to emerge.

 


"There is widespread counterfeiting of Thai Industrial Standards Institute [TISI] and Food and Drug Administration [FDA] numbers, making substandard goods appear certified. Platforms struggle to verify these numbers," Pawoot noted.
 


However, the Chinese goods market is evolving, shifting from low-quality, cheap products to high-quality, legally imported goods. Increased competition within China is driving quality brands to expand internationally.

 

The current e-commerce battleground is characterised by three key players: dominant foreign platforms, competing sellers (both Thai and foreign), and Chinese goods offered at significantly lower prices.

 

 

Questions over foreign investment benefits

Pawoot questioned the true benefits of foreign investment in Thailand, particularly regarding investments in special economic zones and those promoted by the Board of Investment (BOI).

 


"How much does Thailand truly gain from foreign investment? Do we receive 100% of the benefits? Many foreign-owned factories employ fewer Thai workers than expected. Some Chinese companies bring in their own machinery and robots, resulting in minimal local employment," he said. 


 

He cited the example of US tariffs on solar panels from Thailand, which were found to originate from a Chinese company operating in Thailand and benefiting from Thai tax privileges.

 


"Some companies have been operating here for 6-7 years, generating substantial revenue, yet paying no taxes. What are the real benefits for Thailand?"


 

Pawoot also criticised the government's focus on attracting global tech giants to establish data centres in Thailand, arguing that the benefits may be overstated.

 


"Do we truly benefit? As a Thai business, when I pay for data centre services, the money goes to Google Singapore or AWS in the US. Where is the benefit for Thailand?"
 


 

He urged the government to evaluate the true value of foreign investment and implement measures to maximise benefits, such as mandatory local employment and revenue recording for tax purposes.

 

 

E-commerce tax: Fair or burdensome?

The Revenue Department's enforcement of VAT collection from online stores is adding to the challenges faced by Thai entrepreneurs, particularly small businesses.

 

Pawoot pointed to the Customs Department's initial laxity in controlling the influx of substandard goods as a contributing factor. While inspections have increased, issues persist.

 

However, some argue that fair tax collection could create a level playing field, particularly as the Revenue Department begins collecting sales data from major platforms.

 

Regarding government support, Pawoot believes that while efforts are being made, they are not yet effective. He highlighted the "Gray Capital Detective" project, which allows citizens to report illegal business activities, as a step in the right direction.

 

The most common issue reported is foreigners using proxies to conduct businesses in Thailand, particularly in tourist hotspots such as Phuket and Pattaya.

(2025/03/05-00:00)